No. 80-08
I N THE SURPEME COURT O THE STATE O F M N A A
F OTN
1980
DAVID REICHERT and IRENE L. REICHERT,
P l a i n t i f f s and A p p e l l a n t s ,
-vs-
WILLIAM WEEDEN, MARINETTE WEEDEN, JAMES HERTZ,
CONSTANCE HERTZ, PAUL STRAW, e t a l . ,
D e f e n d a n t s and Respondents.
Appeal from: D i s t r i c t Court of t h e T h i r t e e n t h J u d i c i a B D i s t r i c t ,
I n and f o r t h e County o f Y e l l o w s t o n e , The Honorable
R o b e r t H . Wilson, Judge p r e s i d i n q .
Counsel o f Record:
For Appellant:
B e r g e r , Anderson, S i n c l a i r & Murphy, B i l l i n g s , Montana
Donald Molloy a r g u e d , B i l l i n g s , Montana
For Respondent :
Crowley, Haughey, Hanson, T o o l e & D i e t r i c h ,
B i l l i n g s , Montana
J a c k R a m i r e z a r g u e d , B i l l i n g s , Montana
Submitted: September 1 2 , 1980
Filed:
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Mr. Justice John Conway Harrison delivered the Opinion of
the Court.
This is an appeal from the District Court of the
Thirteenth Judicial District which upheld the validity of a
document entitled "Agreement and Land Use Restrictions" and
granted summary judgment allowing the agreement to be
enforced by the defendants against the plaintiffs.
We will address the following issues on this appeal:
1. Whether a valid and enforceable covenant running
with the land can be created by written agreement and in the
absence of a formal "grant" of an estate in land, and
whether the covenants contained in the written agreement
between the parties were intended to and do run with the
land, so that plaintiffs and any subsequent purchasers or
assignees are obligated to perform those covenants.
2. Whether the written agreement between the parties
purporting to be restrictions on land use violates a statute
which prohibits a contract in restraint of trade.
Plaintiffs, the Reicherts, own property in Yellowstone
County upon which they operate a restaurant and bar known as
the Echo Inn. Plaintiffs acquired this property in 1970 by
a warranty deed. Defendants are various resident landowners
in the vicinity of the Echo Inn, although none of them own
land immediately adjacent thereto.
In 1969 plaintiffs applied for a liquor license for the
premises, which was conditionally approved. Defendants
filed a complaint with the Montana Liquor Control Board in
1970 protesting the approval of plaintiffs' application.
The Board denied their request for relief. Defendants then
appealed to the District Court, and during the pendency of
the action, the liquor license application was stayed.
Defendants and other area landowners proceeded
simultaneously on a second front by filing a petition with
the Yellowstone County Commissioners for the creation of a
county planning and zoning district. Such a district was
created on August 25, 1970, and thereby prohibited use of
any property within the district--including the Echo
Inn--for any use other than single family residential.
Plaintiffs appealed the resolution of the County
Commissioners creating the zoning district to the District
Court.
In settlement of these controversies, the parties
entered into an agreement on December 28, 1970, pursuant to
which defendants consented to judgment in the pending
District Court actions and agreed not to challenge the use
of the property as a restaurant and bar for a period of ten
years. This agreement was recorded and provides that the
plaintiffs' property shall not be used for the sale of beer
or liquor after January 1, 1981, and that the covenants
"shall run with the land and bind t h e j r e s e n t owners and
their heirs and assigns." (Emphasis supplied.) Plaintiffs
brought this action in 1979 to have the agreement declared
void and not enforceable.
The pertinent section of the agreement states:
"IT IS FURTHER AGREED, that the covenants,
promises, ....................... set forth in this
and restrictions
agreement shall run with the land and bind the
- -
present owners, their heirs- and assigns; and any
--- -
and a l l p a r t i e s claiming- by, through, or under
them, shall- taken to agree and covenant with
be
each of the parties to this aqreement, his heirs
and assiqns, to conform to the covenants.
promises, -and restrictions as to the use of the
above described real property and the improvements
thereon. Each of the parties to this agreement,
his heirs and assigns, shall have the right to sue
for and obtain an injunction, prohibitive or
mandatory, to prevent the breach of, or to enforce
t h e o b s e r v a n c e o f , t h e c o v e n a n t s , p r o m i s e s , and
r e s t r i c t i o n s s e t f o r t h above, i n a d d i t i o n t o t h e
o r d i n a r y l e g a l a c t i o n f o r damages; and t h e f a i l u r e
o f any o f t h e p a r t i e s , h i s h e i r s and a s s i g n s , t o
e n f o r c e t h i s agreement a t t h e time of any
v i o l a t i o n t h e r e o f s h a l l n o t be c o n s t r u e d a s a
w a i v e r of t h e r i g h t t o do s o . The r e s t r i c t i o n s
c o n t a i n e d h e r e i n c o n c e r n i n g t h e u s e o f t h e above
d e s c r i b e d r e a l p r o p e r t y and t h e improvements
t h e r e o n c a n n o t b e c h a n g e d w i t h o u t t h e unanimous
w r i t t e n c o n s e n t of a l l of t h e p a r t i e s t o t h i s
a g r e e m e n t , t h e i r h e i r s and a s s i g n s , s a i d c o n s e n t
t o be d u l y acknowledged and r e c o r d e d i n t h e o f f i c e
o f t h e C l e r k and R e c o r d e r o f Y e l l o w s t o n e C o u n t y ,
Montana. The t e r m ' h e i r s and a s s i g n s ' a s u s e d i n
t h i s a g r e e m e n t s h a l l i n c l u d e t h e d e v i s e e s and
t r u s t e e s of t h e p a r t i e s . " (Emphasis a d d e d . )
The agreement's purpose and scope is clear. The
document's lengthy and detailed nature precludes any
c h a l l e n g e a s t o i t s meaning o r t h e i n t e n t o f t h e p a r t i e s .
The "Agreement and Land Use R e s t r i c t i o n s " v o l u n t a r i l y
e n t e r e d i n t o a l m o s t t e n y e a r s a g o by t h e p a r t i e s , each w i t h
t h e a d v i c e of c o u n s e l , i s v a l i d and b i n d i n g on e a c h o f the
p a r t i e s and t o t h e i r s u c c e s s o r s i n i n t e r e s t . The a g r e e m e n t
was e x p r e s s l y i n t e n d e d t o c o n s t i t u t e a c o v e n a n t r u n n i n g w i t h
t h e l a n d and t o b i n d t h e p r e s e n t owners, t h e i r h e i r s and
assigns. Having been filed as a matter of record in
Yellowstone County, t h a t agreement is, i n f a c t , a covenant
r u n n i n g w i t h t h e p l a i n t i f f s ' p r o p e r t y and c r e a t e d a n e g a t i v e
easement i n f a v o r of d e f e n d a n t s .
The p r e s e n t d i s p u t e a r i s e s when p l a i n t i f f s , owners o f
t h e s e r v i e n t tenement, contends t h a t a " g r a n t " of an e s t a t e
is a s t a t u t o r y r e q u i r e m e n t f o r t h e c r e a t i o n of a covenant
r u n n i n g w i t h t h e l a n d , and s i n c e d e f e n d a n t s d i d n o t g r a n t a n
i n t e r e s t of the land to plaintiffs, the agreement is not
enforceable. S e c t i o n 70-17-201, MCA, states:
" C e r t a i n covenants contained i n g r a n t s of e s t a t e s
i n r e a l property a r e appurtenant t o such e s t a t e s
and p a s s w i t h them s o a s t o b i n d t h e a s s i g n s o f
t h e c o v e n a n t o r and t o v e s t i n t h e a s s i g n s o f t h e
c o v e n a n t e e i n t h e same manner a s i f t h e y had
p e r s o n a l l y e n t e r e d i n t o them. Such c o v e n a n t s a r e
s a i d t o run w i t h t h e l a n d . "
S e c t i o n 70-17-203(1), MCA, states:
" E v e r y c o v e n a n t c o n t a i n e d i n a g r a n t o f an e s t a t e
i n r e a l p r o p e r t y , w h i c h i s made f o r t h e d i r e c t
b e n e f i t o f t h e p r o p e r t y o r some p a r t o f i t t h e n i n
existence, runs with the land."
P l a i n t i f f s i n s i s t t h a t no c o v e n a n t r u n s w i t h t h e l a n d
and w i l l n o t be b i n d i n g u n l e s s c e r t a i n w o r d s a r e c o n t a i n e d
i n t h e document. S i n c e t h o s e words a r e n o t found i n t h i s
document, t h e y m a i n t a i n t h a t no g r a n t o f a n e s t a t e i n r e a l
p r o p e r t y took p l a c e , and t h e c o v e n a n t s do n o t r u n w i t h t h e
land. W disagree.
e
Plaintiffs were aware of their actions, and their
i n t e n t was c l e a r . Not o n l y d i d t h e y g r a n t away a p r e s e n t
interest, but a l s o a f u t u r e i n t e r e s t t h a t w i l l bind t h e i r
h e i r s and a s s i g n s . T h i s i n t e r e s t i n t h e land is t h e r i g h t
to sell liquor or operate a bar on the land after a
particular date. P l a i n t i f f s t o o k away f r o m t h e l a n d t h a t
interest and conveyed it to defendants by means of a
written, recorded agreement. They g a v e away a n i n t e r e s t i n
t h e l a n d by c r e a t i n g a n e g a t i v e e a s e m e n t b i n d i n g n o t o n l y
t h e m s e l v e s , b u t t h e i r h e i r s and a s s i g n s .
Montana recognizes negative easements. Northwestern
Improvement Co. v . Lowry ( 1 9 3 7 ) , 1 0 4 Mont. 2 8 9 , 66 P.2d 792.
A n e g a t i v e e a s e m e n t c r e a t e d by a n a g r e e m e n t , a deed o r a
l e a s e is e n f o r c e a b l e a g a i n s t g r a n t e e s o r p u r c h a s e r s of the
s e r v i e n t tenement. E a s e m e n t s may b e c r e a t e d by a c o n t r a c t
o r covenant; such agreements a r e g r a n t s i n e f f e c t . Montana
s t a t u t e s a l l o w f o r t h e c r e a t i o n o f c o v e n a n t s and e a s e m e n t s
g o v e r n i n g t h e r i g h t t o t r a n s a c t b u s i n e s s on l a n d . Section
70-17-101(6), MCA.
Plaintiffs' present claims that t h e magical words
" g r a n t o r convey" w e r e n o t u s e d , c a n n o t now be u s e d by them
to set aside that which the parties intended and later
entered into.
"The t e r m ' c o n v e y a n c e ' a s used [here] . . .
e m b r a c e s e v e r y i n s t r u m e n t i n w r i t i n g by which a n y
e s t a t e or i n t e r e s t i n r e a l property is created,
a l i e n e d , m o r t g a g e d , o r encumbered o r by which t h e
t i t l e t o r e a l p r o p e r t y may be a f f e c t e d . . ."
S e c t i o n 70-21-301, MCA.
This definition of a conveyance of real property is
s u f f i c i e n t l y comprehensive t o i n c l u d e t h e w r i t t e n agreement
t h a t placed a c o v e n a n t on t h e r e a l p r o p e r t y which is t h e
b a s i s of the present controversy. Kosel v. Stone (1965),
146 Mont. 218, 404 P.2d 894. A n e g a t i v e easement can be
created by a grant or agreement, the agreement being
c o n s t r u e d a s a g r a n t , and i s b i n d i n g upon p u r c h a s e r s o f t h e
s e r v i e n t t e n e m e n t who h a v e a c t u a l o r c o n s t r u c t i v e n o t i c e o f
it.
I n a n e a r l i e r Montana c a s e , O r c h a r d Homes D i t c h Co. v.
Snavely ( 1 9 4 5 ) , 1 1 7 Mont. 484, 489, 1 5 9 P.2d 521, 523, in
comparing the s i m i l a r i t i e s of present California law w i t h
Montana law, this Court quoted favorably from a treatise
i n t e r p r e t i n g t h e C a l i f o r n i a law.
". . . a l t h o u g h t h e Code o f C a l i f o r n i a p r o v i d e s
t h a t a c o v e n a n t c a n n o t be made t o r u n w i t h t h e
l a n d e x c e p t w h e r e s u c h c o v e n a n t i s made i n
c o n n e c t i o n w i t h and a s a p a r t o f t h e c o n v e y a n c e o r
t r a n s f e r of t h e l a n d i t s e l f , an e x p r e s s agreement
t h a t s u c h a c o v e n a n t s h a l l r u n w i t h a --i n d t h e
nd b
land is e f f e c t u a l . . ."
(Emphasis added.)
Thus, a negative easement may be created by an
agreement executed by an owner of the servient tenement,
j u s t a s i t may be c r e a t e d t h r o u g h a c o n v e y a n c e o r a l e a s e .
The easement is attached to the land and binds all
subsequent purchasers who h a v e constructive notice of the
easement. The written agreement creating the negative
easement is recorded; all subsequent purchasers have
constructive notice thereof, and the easement may be
enforced against them. See Northwestern Improvement Co. v.
Lowry, supra.
Finally, plaintiffs contend the "Agreement and Land Use
Restrictions" at issue restrains plaintiffs from exercising
a lawful profession and, as such, is void as a violation of
section 28-2-703, MCA:
"Any contract by which anyone is restrained from
exercising a lawful profession, trade, or business
of any kind, otherwise than is provided for by
section 28-2-704 or 28-2-705, is to that extent
void. "
We do not find any credence in this argument. The
agreement created a negative easement on a particular piece
of property. The restrictive covenants run with the land
and not with plaintiffs. The restrictive covenants' purpose
is not designed to prevent competition. Their purpose is to
insure that the area remains as single family residential.
A recognized restraint of the right to do business does
exist with the proper creation of a negative easement.
Northwestern Improvement Co. v. Lowry, supra. The agreement
is not merely a personal contract between the parties, but
creates a property interest which is not within the scope of
the statute. Plaintiffs are not restricted from conducting
a lawful profession. On the contrary, its purpose is to
limit a particular conduct on a particular piece of land.
The agreement between the par ties does not restrict
plaintiffs' ability to conduct any trade or business and
does not purport to prevent plaintiffs from engaging in the
business of selling alcoholic beverages. If plaintiffs wish
to transfer their license to another location, or apply for
a new license for another location, they are free to do so.
The agreement between the parties only states that
plaintiffs may not use their piece of property in Echo
Canyon for the operation of a liquor business.
Affirmed.
We concur:
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Chief Justice
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